Tax Glossary

Resident Landlord

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Last updated on:
March 17, 2024

A resident landlord, often known as a live-in landlord, is an individual who offers a part of their primary residence for rent to a lodger. This setup creates a unique living arrangement where the landlord and lodger share common spaces while maintaining their private rooms.

Exclusions from Being a Live-in Landlord

You're not considered a live-in landlord under certain conditions, such as:

  • If you're legally not residing at the property.
  • The property consists of self-contained flats, and you live in a different unit from your lodger.

To qualify as a live-in landlord, the property must serve as your sole and main residence throughout the rental period.

Steps to Become a Live-in Landlord

  1. Permission and Legalities: You don't generally need explicit permission to take on a lodger. However, if your home is mortgaged, you should seek approval from your lender. Leaseholders and council tenants may have specific conditions or need permission to rent out space.
  2. Creating a Lodger Agreement: Outline the terms of stay in a written agreement with your lodger, covering rent due dates, notice periods, and any specific rules.
  3. Utilities and Rent: Decide whether utilities are included in the rent or billed separately.

Discounts and Financial Considerations

  • Council Tax: Renting out a part of your property usually means losing any single occupancy council tax discount. Inform your local council about the new arrangement to adjust your tax rate.
  • Tax-Free Earnings: Through the Rent a Room Scheme, you can earn up to £7,500 per year tax-free from your lodger. Earnings above this threshold are taxable and may require filing a Self-Assessment tax return. It's important to note that claiming this allowance means you cannot deduct expenses related to the rental.
  • Choosing Between Allowances and Expenses: Depending on your situation, it might be more beneficial financially to opt for the Rent a Room Scheme or to declare all income and claim allowable expenses.
  • Housing Benefit Payments: If your lodger is eligible for housing benefits, these will typically be paid directly to them. However, you can request payments to be made to you directly if there are issues with rent arrears.

Being a live-in landlord offers a way to generate additional income while making use of spare space in your home. Understanding the legalities, financial implications, and responsibilities involved ensures a smooth and mutually beneficial arrangement.

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